IRISH business has had to get used to currency instability in recent years. First came the currency crisis of late 1992 and early 1993. And then over the past year the pound has fallen sharply against a rising sterling, but gained ground against the other ERM currencies. One of the key advantages of the single currency is that it will lessen such instability, providing stable and low interest rates and a fixed currency value against many of our trading partners.

But unfortunately all the signs are that the run up to the single currency could be a rocky ride for business as market speculators and investors make big bets about who will be in and who will be out and also about the rates at which currencies will be locked.

Over recent months businesses have had to contend with fairly significant changes in the value of the pound. And then over the past few weeks speculators have targeted the currency, driving it sharply down in value on a number of occasions. All the signs are that in the months ahead this instability will continue. The pound remains well above its central rate in the EU exchange rate mechanism and, despite comments from the Minister for Finance, Mr Quinn, that it may not join at this level, international investors still believe central rates are a good bet for the levels at which currencies will be fixed in the ERM.

So sporadic bouts of selling are likely to hit the pound. Add in the notorious instability of sterling and the importance for businesses of hedging their currency exposures becomes evidence. In particular, businesses who have to pay bills in other ERM currencies might like to reflect that the pound could fall further in the months ahead, if confidence grows in international markets that the central rates will be used.

Mr Quinn, has, of course, appeared to hint that Ireland might like a higher rate of entry, somewhere between its current rate of 2.57 deutschmark and the DM2.41 central rate. A conversion rate of DM 2.50 has a nice ring about it, but we must remember that Ireland is very much a bit player in the upcoming decision on the rates at which currencies will be locked.

However instability is also likely to hit other areas of the financial markets in the run up to monetary tin ion. We have already seen how pressure on the pound can push up interest rates. And further upward pressure on rates in the short term cannot be ruled out. But in the months ahead pressure on Irish interest rates is likely to turn in the other direction.

Speculation is growing that there may be a clear indication at EU level before the end of the year on which states will join monetary union. If, as looks very likely, Ireland is a part of this group, then interest rates particularly short term rates simply have to fall. And fall sharply, as Irish short term rates are 2.5 percentage points or more above their German equivalents.

So expect rapid downward pressure on Irish interest rates sometime over the next year. Unless of course monetary union goes off track, and then all bets are off and rates could rise sharply.

Of course the potential for currency and interest rate instability highlights another issue. As we join the single currency the power of Irish policy makers to react to economic circumstances will be sharply reduced. And this means that there will be much more emphasis on the needs for individual businesses to be flexible and adjust.

Unfortunately Partnership 2000 said little in this area. But both policy makers and businesses need to turn their minds to this issue once the election is out of the way.